The Competition and Markets Authority (CMA) has taken action against a supplier for trying to impose price restrictions on internet retailers. Ultra Finishing Limited, a supplier of bathroom fittings, has agreed to pay a fine of £786,668 in respect of engaging in resale price maintenance (RPM) from 2012 to 2014.
The original fine was over £1 million. However, Ultra Finishing Limited received discounts for admitting its infringement and for subsequently implementing a tailored compliance programme, which will be rolled out to all employees.
What is RPM?
RPM is a form of price fixing. It occurs when an upstream seller (e.g. a manufacturer or distributor) restricts the ability of a downstream buyer (e.g. a distributor or retailer) to determine its own selling prices. Ultra Finishing Limited threatened online retailers with penalties if they did not price "Hundson Reed" and "Ultra" branded products at or above the recommended retail price (RRP). The penalties included:
- Ceasing to supply the online retailers.
- Charging the online retailers higher cost prices.
- Withdrawing the online retailers' rights to use Ultra Finishing Limited's images online.
Which sectors does RPM affect?
RPM does not just affect the bathroom fittings sector or online retailers; it can affect any sector where the distribution and resale of goods or services is entrusted to an independent third party.
There have been numerous instances in the past of RPM being investigated and sanctioned by the CMA and its predecessor, the Office of Fair Trading (OFT). It now seems to be back as an enforcement priority for the UK Competition Authority, which may be good for consumers but problematic for suppliers and resellers.
In mainland Europe, many instances of RPM have been uncovered and sanctions issued. Some recent examples include:
- Seven retailers and four manufacturers in the food and pet food sector were fined EUR 151.6 million by the German Federal Cartel Office (June 2015).
- Swatch was fined EUR 500,000 by the Polish Competition Authority (December 2015).
- ActionSportGames was fined EUR 42,900 by the Danish Competition and Consumer Authority (June 2015).
How can you protect your company from a RPM claim?
Reviewing your company's pricing practices is a key first step in establishing whether you have anything to be concerned about. Do seek specialist legal advice if you find any evidence of your company seeking to control the selling prices of another business, or evidence of another business seeking to influence or control your company's selling prices.
Catching a potential problem early will often mean you have more options for dealing with it. If you ignore the problem, you could be the next business making the headlines. As the CMA might say "you have been warned"!